UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission File Number 333-135852
BLUGRASS ENERGY, INC.
(Formerly Coastal Media Inc.)
(Exact name of small business issuer in its charter)
Nevada 20-4952339
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3751 Appian Way, Suite #75
Lexington, KY 40517-5929
(Address of principal executive offices)
(859)552-6036
(Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated Filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
There were 54,000,000 shares of Common Stock outstanding as of November 11,
2008.
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Balance Sheets - September 30, 2008 and June 30, 2008 5
Statements of Operations -
Three months ended September 30, 2008 and 2007 and From
May 19, 2006 (Inception) to September 30, 2008 6
Statements of Cash Flows -
Three months ended September 30, 2008 and 2007 and From 7
May 19, 2006 (Inception) to September 30, 2008
Notes to the Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market
Risk - Not Applicable 14
Item 4. Controls and Procedures 14
Item 4T. Controls and Procedures 14
PART II - OTHER INFORMATION
16
Item 1. Legal Proceedings - Not Applicable
16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
- Not Applicable 16
Item 3. Defaults Upon Senior Securities - Not Applicable 16
Item 4. Submission of Matters to a Vote of Security Holders
- Not Applicable 16
Item 5. Other Information - Not Applicable 16
Item 6. Exhibits 16
SIGNATURES 17
2
ITEM 1. FINANCIAL STATEMENTS
The un-audited quarterly financial statements for the period ended September 30,
2008, prepared by the company, immediately follow.
3
GEORGE STEWART, CPA
2301 SOUTH JACKSON STREET, SUITE 101-G
SEATTLE, WASHINGTON 98144
(206) 328-8554 FAX(206) 328-0383
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Coastal Media, Inc.
I have reviewed the condensed balance sheet of Coastal Media, Inc. as of
September 30, 2008, and the related condensed statements of operations for the
three months ended September 30, 2008 and 2007 and for the period from May 19,
2006 (inception) to September 30, 2008, and condensed statements of cash flows
for the three months ended September 30, 2008 and 2007 and for the period from
May 19, 2006 (inception) to September 30, 2008. These financial statements are
the responsibility of the company's management.
I conducted my review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with standards
of the Public Company Accounting Oversight Board (United States), the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying interim financial statements for them to be in
conformity with generally accepted accounting principles in the United States of
America.
I have previously audited, in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States), the balance sheet of Coastal
Media, Inc. as of June 30, 2007, and the related statements of operations,
retained earnings and cash flows for the year then ended (not presented herein);
and in my report dated September 27, 2007, I expressed a going concern opinion
on those financial statements. In my opinion, the information set forth in the
accompanying condensed balance sheet as of June 30, 2007, is fairly stated, in
all material respects, in relation to the balance sheet from which it has been
derived.
/s/ George Stewart, CPA
- ------------------------------
Seattle, Washington
November 11, 2008
4
BLUGRASS ENERGY, INC.
(Formerly Coastal Media Inc.)
(A Development Stage Company)
Balance Sheet
- --------------------------------------------------------------------------------
As of As of
September 30, June 30,
2008 2008
-------- --------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 8,164 $ 14,277
-------- --------
TOTAL CURRENT ASSETS 8,164 14,277
FIXED ASSETS
Office Equipment 3,424 3,424
-------- --------
TOTAL FIXED ASSETS 3,424 3,424
-------- --------
TOTAL ASSETS $ 11,588 $ 17,701
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to a Director $ 400 $ 250
-------- --------
TOTAL CURRENT LIABILITIES 400 250
TOTAL LIABILITIES 400 250
STOCKHOLDERS' EQUITY
Common stock, ($0.001 par value, 75,000,000 shares
authorized; 3,600,000 shares issued and outstanding
as of September 30, 2008 and June 30, 2008 3,600 3,600
Additional paid-in capital 46,400 46,400
Deficit accumulated during development stage (38,812) (32,549)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 11,188 17,451
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 11,588 $ 17,701
======== ========
See Notes to the Financial Statements.
5
BLUGRASS ENERGY, INC.
(Formerly Coastal Media Inc.)
(A Development Stage Company)
Statement of Operations
(Unaudited)
- --------------------------------------------------------------------------------
May 19, 2006
Three Months Three Months (inception)
Ended Ended through
September 30, September 30, September 30,
2008 2007 2008
---------- ---------- ----------
REVENUES
Revenues $ -- $ -- $ --
---------- ---------- ----------
TOTAL REVENUES -- -- --
PROFESSIONAL FEES 4,000 -- 15,500
DEPRECIATION EXPENSE -- -- 747
GENERAL & ADMINISTRATIVE EXPENSES 2,263 1,782 22,565
---------- ---------- ----------
TOTAL GENERAL & ADMINISTRATIVE EXPENSES 6,263 1,782 38,812
---------- ---------- ----------
NET INCOME (LOSS) $ (6,263) $ (1,782) $ (38,812)
========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.00 $ 0.00
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,600,000 3,600,000
========== ==========
See Notes to the Financial Statements.
6
BLUGRASS ENERGY, INC.
(Formerly Coastal Media Inc.)
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
- --------------------------------------------------------------------------------
May 19, 2006
Three Months Three Months (inceptio
Ended Ended through
September 30, September 30, September
2008 2007 2008
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (6,263) $ (1,782) $(38,812)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation -- -- 747
Changes in operating assets and liabilities:
Payable to a Director 200 50 400
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (6,063) (1,732) (37,665)
CASH FLOWS FROM INVESTING ACTIVITIES
Office Equipment -- (3,662) (4,171)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -- (3,662) (4,171)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock -- -- 3,600
Additional paid-in capital -- -- 46,400
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -- -- 50,000
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (6,063) (5,394) 8,164
CASH AT BEGINNING OF PERIOD 14,227 30,844 --
-------- -------- --------
CASH AT END OF YEAR $ 8,164 $ 25,450 $ 8,164
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during year for:
Interest $ -- $ -- $ --
======== ======== ========
Income Taxes $ -- $ -- $ --
======== ======== ========
See Notes to the Financial Statements.
7
BLUGRASS ENERGY, INC,
(Formerly Coastal Media Inc.)
(An Development Stage Company)
Notes to Financial Statements
September 30, 2008
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Coastal Media Inc. (the Company) was incorporated under the laws of the State of
Nevada on May 19, 2006. On October 1, 2008, the Company amended its Article of
Incorporation to change its name from Coastal Media Inc. to BluGrass Energy,
Inc. The Company was formed to engage in the business of manufacturing,
marketing, distributing and selling its marine DVDs.
The Company is in the development stage. Its activities to date have been
limited to capital formation, organization and development of its business plan.
The Company has commenced limited start up operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF ACCOUNTING
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a June 30 year-end.
b. INTERIM PRESENTATION
In the opinion of the management of the Company, the accompanying unaudited
financial statements include all material adjustments, including all normal and
recurring adjustments, considered necessary to present fairly the financial
position and operating results of the Company for the periods presented. The
financial statements and notes do not contain certain information included in
the Company's financial statements for the year ended June 30, 2008. It is the
Company's opinion that when the interim financial statements are read in
conjunction with the June 30, 2008 Audited Financial Statements, the disclosures
are adequate to make the information presented not misleading. Interim results
are not necessarily indicative of results for a full year or any future period.
C. BASIC EARNINGS PER SHARE
In February 1997, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share", which specifies the computation,
presentation and disclosure requirements for earnings (loss) per share for
entities with publicly held common stock. SFAS No. 128 supersedes the provisions
of APB No. 15, and requires the presentation of basic earnings (loss) per share
and diluted earnings (loss) per share. The Company has adopted the provisions of
SFAS No. 128 effective May 19, 2006 (date of inception).
Basic net loss per share amounts is computed by dividing the net loss by the
weighted average number of common shares outstanding. Diluted earnings per share
are the same as basic earnings per share due to the lack of dilutive items in
the Company.
D. CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
8
BLUGRASS ENERGY, INC,
(Formerly Coastal Media Inc.)
(An Development Stage Company)
Notes to Financial Statements
September 30, 2008
- --------------------------------------------------------------------------------
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. In accordance with FASB 16 all
adjustments are normal and recurring.
F. INCOME TAXES
Income taxes are provided in accordance with SFAS No. 109, "Accounting for
Income Taxes". A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating loss
carryforwards. Deferred tax expense (benefit) results from the net change during
the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of the deferred
tax assets will be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment.
G. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided principally on the straight-line method over the
estimated useful lives of the assets, which are generally 3 to 27 years. The
amounts of depreciation provided are sufficient to charge the cost of the
related assets to operations over their estimated useful lives. Upon sale or
other disposition of a depreciable property, cost and accumulated depreciation
are removed from the accounts and any gain or loss is reflected in other income.
The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of fixed assets
or whether the remaining balance of fixed assets should be evaluated for
possible impairment. The Company uses an estimate of the related undiscounted
cash flows over the remaining life of the fixed assets in measuring their
recoverability.
NOTE 3. GOING CONCERN
The accompanying financial statements are presented on a going concern basis.
The Company had limited operations during the period from May 19, 2006 (date of
inception) to August 30, 2008 and generated a net loss of $38,811. This
condition raises substantial doubt about the Company's ability to continue as a
going concern. Although the Company is currently in the development stage and
has minimal expenses, management does not believe that the company's current
cash of $8,164 will be sufficient to cover the expenses they will incur during
the next twelve months in even a limited operations scenario.
NOTE 4. WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares of
common stock.
9
BLUGRASS ENERGY, INC,
(Formerly Coastal Media Inc.)
(An Development Stage Company)
Notes to Financial Statements
September 30, 2008
- --------------------------------------------------------------------------------
NOTE 5. RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. The Company
has been paying Jon Suk, a director, $50 per month for use of his boat. The
Company also paid Jan Aaron Sigurgeirson, President, $100 per month for use of
office space and services from inception until October 2006. The officers and
directors of the Company may, in the future, become involved in other business
opportunities as they become available, they may face a conflict in selecting
between the Company and their other business opportunities. The Company has not
formulated a policy for the resolution of such conflicts.
NOTE 6. INCOME TAXES
As of September 30, 2008
------------------------
Deferred tax assets:
Net operating tax carryforwards $ 38,812
Tax Rate 34%
--------
Gross deferred tax assets 13,196
Valuation allowance (13,196)
--------
Net deferred tax assets $ 0
========
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that deductible temporary differences and carryforwards
are expected to be available to reduce taxable income. As the achievement of
required future taxable income is uncertain, the Company recorded a valuation
allowance.
NOTE 7. NET OPERATING LOSSES
As of September 30, 2008, the Company has a net operating loss carryforwards of
approximately $38,812. Net operating loss carryforward expires twenty years from
the date the loss was incurred.
NOTE 8. STOCK TRANSACTIONS
Transactions, other than employees' stock issuance, are in accordance with
paragraph 8 of SFAS 123, "Share-Based Payment". Thus issuances shall be
accounted for based on the fair value of the consideration received.
Transactions with employees' stock issuance are in accordance with paragraphs
(16-44) of SFAS 123. These issuances shall be accounted for based on the fair
value of the consideration received or the fair value of the equity instruments
issued, or whichever is more readily determinable.
On May 19, 2006 the Company issued a total of 2,000,000 shares of common stock
to two directors for cash in the amount of $0.005 per share for a total of
$10,000.
On February 9, 2007 the Company completed its SB-2 offering and issued a total
of 1,600,000 shares of common stock to twenty eight unrelated investors for cash
in the amount of $0.025 per share for a total of $40,000.
As of September 30, 2008 the Company had 3,600,000 shares of common stock issued
and outstanding.
10
BLUGRASS ENERGY, INC,
(Formerly Coastal Media Inc.)
(An Development Stage Company)
Notes to Financial Statements
September 30, 2008
- --------------------------------------------------------------------------------
NOTE 9. STOCKHOLDERS' EQUITY
The stockholders' equity section of the Company contains the following classes
of capital stock as of September 30, 2008:
Common stock, $ 0.001 par value: 75,000,000 shares authorized; 3,600,000 shares
issued and outstanding.
NOTE 10. SUBSEQUENT EVENTS
On October 1, 2008, the Company affected a forward stock split of the issued and
outstanding shares of common stock on a fifteen for one basis. Authorized
capital remained at 75,000,000 common shares and par value remained at $.001 per
share. After the forward split the Company had 54,000,000 shares issued and
outstanding.
In addition, on October 1, 2008, the Company amended its Articles of
Incorporation to change its name from "Coastal Media Inc." to "Blugrass Energy
Inc.". As a result of the name of the change, the Company's trading symbol was
changed to "BLUG".
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS. ANY
STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE
DEEMED TO BE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE
SECURITIES EXCHANGE ACT. THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "SEEKS,"
"EXPECTS," "INTENDS" AND SIMILAR EXPRESSIONS IDENTIFY SOME OF THE
FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF
PERFORMANCE OR FUTURE RESULTS AND INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS.
THE FACTORS DISCUSSED ELSEWHERE IN THIS FORM 10-Q COULD ALSO CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY THE COMPANY'S
FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY
UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS.
BUSINESS AND PLAN OF OPERATIONS
Our original business plan which we commenced in June 2006 was to operate a
cruising guides website and produce and sell multimedia DVD for pleasure
boating. While we have vigorously pursued our business plan it is apparent that
we cannot continually incur operating losses in the future and have decided that
we can no longer continue with our business operations as detailed in our
original business plan because of a lack of financial results and a lack of
available financial resources.
We have begun looking for other potential business opportunities that might be
available to the Company and have decided to focus our attention on
opportunities in the oil and gas industry. Our management is analyzing various
alternatives available to our Company to ensure our survival and to preserve our
shareholder's investment in our common shares. We can make no assurances that we
will be able to identify such a business opportunity or complete such a
transaction.
As part of our efforts to search for new potential business opportunities in the
oil and gas industry, on October 1, 2008, we amended our articles of
incorporation to changes our name from Coastal Media, Inc. to Blugrass Energy,
Inc. In connection with our name change, our trading symbol was changed to
"BLUG". In addition, on October 1, 2008, we effected a 15 for 1 forward stock
split of our issued and outstanding common stock. As a result, our authorized
capital did not increase and remains at 75,000,000 shares of common stock. Our
issued and outstanding common stock increased from 3,600,000 to 54,000,000
shares of common stock.
We expect that our current cash balance of $8,164 on September 30, 2008 will
allow us to complete the next 6 months without additional funds, in a limited
operations scenario. Our director has verbally agreed to loan the company funds
to continue operations in a limited scenario until sales will support
operations. We currently have no plans to hire additional employees in the next
twelve months unless sales are sufficient to cover the cost.
12
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2007
We are still in our development stage and have no revenues to date.
We incurred operating expenses of $6,263 and $1,782 for the three month periods
ended September 30, 2008 and 2007, respectively. The increase of $4,481 is a
result of the increase of $4,000 in professional fees and an increase of $482 in
general and administrative expenses over the prior period. The increase in our
operating expenses for the three months ended September 30, 2008, was a result
of work in connection with compliance with filing requirements.
During the three months ended September 30, 2008, we recognized a net loss of
$6,263 compared to a net loss of $1,782 for the three months ended September 30,
2007. The increase of $4,481 was a result of the $4,481 increase in operational
expenses as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2008, we had total assets of $11,588, of which $8,164 was cash
and $3,424 were fixed assets. At September 30, 2008, we had total current
liabilities of $400, consisting of a $400 payable to a director of the Company.
During the three months ended September 30, 2008, we used cash of $6,063 in
operations. During the three months ended September 30, 2007, we used $1,732 in
operations. During the three months ended September 30, 2008, net losses of
$6,263 were not adjusted for any non-cash items. During the three months ended
September 30, 2007, net losses of $1,732 were not adjusted for any non-cash
items.
During the three months ended September 30, 2008, we did not have any cash flows
from investment activities. During the three months ended September 30, 2007, we
used $3,662 in investment activities.
During the three months ended September 30, 2008 and 2007, we did not receive
any funds from financing activities.
Our auditors have expressed their doubt about our ability to continue as a going
concern unless we are able to generate profitable operations.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
13
NEED FOR ADDITIONAL FINANCING
We do not have capital sufficient to meet our cash needs. We will have to seek
loans or equity placements to cover such cash needs. Once exploration commences,
our needs for additional financing is likely to increase substantially.
No commitments to provide additional funds have been made by our management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to us to allow it to cover our expenses as they may be
incurred.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer (Principal
Executive Officer) and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), Ms. Schaffer our Chief Executive Officer and
Principal Accounting Officer, carried out an evaluation under the supervision
and with the participation of our management, of the effectiveness of the design
and operation of our disclosure controls and procedures pursuant to Exchange Act
Rule 15d-14 as of the end of the period covered by this report. Based on the
foregoing evaluation, Mr. Schaffer has concluded that our disclosure controls
and procedures are were not effective in timely alerting them to material
information required to be included in our periodic SEC filings and to ensure
that information required to be disclosed in our periodic SEC filings is
accumulated and communicated to our management, including our Chief Executive
Officer, to allow timely decisions regarding required disclosure as a result of
the deficiency in our internal control over financial reporting discussed below.
ITEM 4T. CONTROLS AND PROCEDURES
MANAGEMENT'S QUARTERLY REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that are based on the framework set forth in the
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on its evaluation under
this framework, management concluded that our internal control over financial
reporting was not effective as of September 30, 2008.
14
Management's assessment of the effectiveness of the registrant's internal
control over financial reporting is as of the period ended September 30, 2008.
Based on the evaluation, management concluded that there is a material weakness
in our internal control over financial reporting. Management identified the
following material weaknesses:
INSUFFICIENT RESOURCES: We have an inadequate number of personnel with
requisite expertise in the key functional areas of finance and accounting.
INADEQUATE SEGREGATION OF DUTIES: We have an inadequate number of personnel
to properly implement control procedures.
LACK OF AUDIT COMMITTEE & OUTSIDE DIRECTORS ON THE COMPANY'S BOARD OF
DIRECTORS: we do not have a functioning audit committee or any outside
directors on the Company's Board of Directors, resulting in ineffective
oversight in the establishment and monitoring of required internal controls
and procedures.
A material weakness is a control deficiency, or combination of control
deficiencies, in ICFR such that there is a reasonable possibility that a
material misstatement of our annual or interim financial statements will not be
prevented or detected on a timely basis by employees in the normal course of
their assigned functions.
REMEDIATION OF MATERIAL WEAKNESS
As discussed in Management's Annual Report on Internal Control over Financial
Reporting, as of June 30, 2008, there were material weaknesses in our internal
control over financial reporting. As our current financial condition allows,
management is committed to improving its internal controls and will (1) continue
to use third party specialists to address shortfalls in staffing and to assist
the Company with accounting and finance responsibilities, (2) increase the
frequency of independent reconciliations of significant accounts which will
mitigate the lack of segregation of duties until there are sufficient personnel
and (3) may consider appointing outside directors and audit committee members in
the future.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this quarterly report.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended September 30, 2008, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Blugrass Energy, Inc. is not currently involved in any legal proceedings and we
are not aware of any pending or potential legal actions.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of unregistered securities during the period covered by this
report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the period covered by this
report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the period
covered by this report.
ITEM 5. OTHER INFORMATION
There was no information required to be disclosed on Form 8-K during the period
covered by this report.
ITEM 6. EXHIBITS
EXHIBITS. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
November 11, 2008 BluGrass Energy, Inc. (Registrant)
By: /s/ Leslie A. Schaefer
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Leslie A. Schaefer, Director, President and
Chief Executive Officer, Chief Financial
Officer and Principal Accounting Officer
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